Enterprise risk management: Its origins and conceptual foundation
Since the mid-1990s, enterprise risk management has emerged as a concept and as a management function within corporations. Enterprise risk management is a systematic and integrated approach to the management of the total risks that a company faces. Its emergence can be traced to two main causes:
First, following a number of high-profile company failures and preventable large losses, the scope of corporate governance has widened to embrace the risks that a company takes. Directors are now increasingly required to report on their internal risk control systems, either through voluntary codes or by legislation.
Second, shareholder value models are playing a greater role in strategic planning. Early strategic planning models paid insufficient attention to rosk. Modern strategic planning models are based more on shareholder value concepts, which draw their inspriarion from the finance theory where risk has always palyed a central role.